What do we do now and what happens next? (Part 1 of 2)

Some industries are ripe for modern technology, while others are slow to adapt to innovative solutions. Broadly speaking, the healthcare sector, hospitality sector, construction industry, and agriculture industry are some of the largest sectors of the economy with the least adoption rates of modern technology.

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You could argue that the legal community, while not quite as rudimentary as some of those other sectors, also has a general case of technophobia. Law firms have relied on traditional workflows involving pen and paper or Microsoft Office files to manage client information. To this day, many firms still adhere to the old ways, potentially placing themselves at a competitive disadvantage.

It begs the question: what lies at the root of these technophobic fears, and how can they be overcome? What do legal professionals need to understand about how technology can simplify their lives so that it increases adoption rates? Let’s look into that and outline answers to those pressing questions.

Legal teams understand legal technology is a growing trend

According to the Wolters Kluwer Future Ready Lawyer Survey, which was disseminated to 751 professionals across North America and Europe, the top three trends cited by respondents are:

1. Growing importance of legal technology in legal workflows
2. Managing increasingly complex information
3. Adapting to new or evolving client needs

The findings show that 79% of survey participants cited these three key areas as the biggest trends impacting the legal industry. At the same time, only 36% of respondents believe their firm or organization is prepared to address these growing trends.

Growing client demand for tech-powered firms

In the same study, participants were asked how they evaluate a potential partnering firm’s use of legal technology, and what impact that has on their decision to enter into business with the firm.

• In 2022, up to 70% of respondents said that how a prospective firm uses legal technology influences whether they enter into a working relationship with that firm.
• The response rate is up from 41% in 2020 and 52% in 2021.
• By 2025, client interest in legal technology is expected to reach 97%.

This particular finding corresponds with other industry studies that show the influence of technology on business operations. Since the COVID-19 pandemic, 77% of business owners admit they want more flexible options to access important files.

These findings should serve as a wake-up call for technophobic law firms. Clients want to work with legal professionals who support their desire for flexible meetings and file access management. Failing to incorporate innovative solutions could result in lost business and missed opportunities to boost Legal Recurring Revenue.

Why are firms reluctant to embrace legal technology

Broadly speaking, companies in most industries struggle to embrace technology out of fear that it will corrupt their use of data. Data lies at the heart of any effective business strategy. However, if that data isn’t clean or organized, it makes it difficult to interpret any insights and feed a business growth strategy.

When looking specifically at the adoption of legal technology, here are the three main reasons law firms are resistant to modern technology.

Mistaken idea that managing legal technology is very time consuming

In the legal community, time really does equate to money. Legal professionals are always looking for ways to increase billable hours so they can boost inbound Legal Recurring Revenue for the firm. As a consequence, many legal minds are under the misguided belief that every minute not used for billable hours is a sunk cost.

Unfortunately, legal teams that fall into this line of thinking risk leaving their operations less efficient and productive than they otherwise could be with legal technology. The amount of time spent on administrative or clerical tasks remains stubbornly high without an innovative solution to streamline all these laborious tasks.

Legal technology is costly and deemed too expensive for the budget

This is the biggest reason why firms refuse to adopt modern legal technology. Without a tangible economic benefit from investing in legal technology, firms don’t see the value in carving out portions of their budget for such investments.

When legal teams fall into this line of thinking, they forget one of the fundamental rules of any business: the cost of doing business. Any company must invest in certain expenditures to maintain and improve operations. Legal technology is one of those expenditures that pays off in the form of time savings and efficient workflows.

Concerns that legal technology will slow things down and create lags

Similar to the time efficiency argument, some law firms believe that legal technology will slow down their rate of operations. They worry that there will be lags in productivity, diminishing the firm’s potential for growth.

The counterargument here is that legal technology is designed to introduce efficiencies to established workflows. Rather than slow things down, legal technology actually speeds things up by reducing the time professionals spend on non-revenue generating tasks.

Why entity management software is the secret to overcoming legal technophobia

Having debunked misguided beliefs about legal technology, what is the optimal solution to improve legal workflows and overcome skeptical feelings towards legal technology? The answer is entity management software, which is designed by legal minds for legal minds.

Entity management software is a form of legal technology developed by legal professionals who represent law firms, legal departments, general counsel, and compliance professionals. It simplifies the complex aspects of entity management and streamlines operations into a workflow that’s efficient, relatable, and even fun.

Entity management software enables legal teams to create one centralized location for all client minute book records. The process of inputting, filing, sorting, and tagging minute book data is complete in a matter of minutes. This is in stark contrast to the time consuming administrative tasks conducted outside of an entity management system. Investing in entity management solutions will help your legal team, particularly your paralegals avoid feelings of burnout.
Teams that use entity management software save invaluable hours on clerical duties that can be reallocated to growing the interests of the firm. It also helps with talent acquisition as many rising legal professionals understand the value of entity management technology. Use your firm’s adoption of entity management systems in your HR strategy. This will encourage the brightest legal minds to join your team and increase Legal Recurring Revenue for your firm.

On December 13, 2018, Bill C-86 received Royal Assent, thereby amending certain provisions of the Canada Business Corporations Act (“CBCA”).

The updated provisions include new record keeping requirements for private companies incorporated under the CBCA. As of June 13, 2019. The updates affect those with “significant control” of a company defined as:

Section 2.1(1)

• (a) an individual who has any of the following interests or rights, or any combination of them, in respect of a significant number of shares of the corporation:
  • (i) the individual is the registered holder of them,
  • (ii) the individual is the beneficial owner of them, or
  • (iii) the individual has direct or indirect control or direction over them;
• (b) an individual who has any direct or indirect influence that, if exercised, would result in control in fact of the corporation; or
• (c) an individual to whom prescribed circumstances apply.

A “significant number of shares” is further defined as:

Section 2.1(3)

• (a) any number of shares that carry 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares; or
• (b) any number of shares that is equal to 25% or more of all of the corporation’s outstanding shares measured by fair market value.

Summary

Private CBCA corporations must now maintain a register of all individuals who fit the above description, and include in the register the names, birth dates, residence (for tax purposes) and other required data.

Shareholders are now obligated to provide true and accurate information when requested by the corporation.

At least once per financial year, the corporation must review and update this information. Once the corporation is aware of any changes, it has 15 days in order to amend the register accordingly. Failure to properly update the information can result in fines of up to $5,000. However, directors or shareholders knowingly providing false information can result in fines of up to $200,000 and/or six months of imprisonment.

The CBCA requirements ensure that corporations (or the law firms that manage the records for those corporations) must undertake a greater number of tasks each year to ensure the corporate records’ compliance.

The process of updating minute book records will be daunting and tedious, especially if the information is stored in physical minute books binders. Document generation tools and clearly organized cloud-based data and databases can make compliance with the new requirements more manageable.

While the new requirements apply only to privately held CBCA corporations, it is certainly possible that the provincial legislatures will debate and perhaps adopt similar requirements.

At MinuteBox, we have already begun internally testing some new features (to be released in 2019) built specifically to support lawyers and clerks through this process.

Absent double-monitor computers and the ability to send emails on smartphones, in many ways lawyers continue to practise the same way they have for generations. The legal industry has oft been described as the last great mature industry to modernize. However, growing pressures from clients and stiffer competition from new legal service providers are compelling law firms to slowly introduce new processes and technologies in order to internally increase work efficiency and externally create client value.

Legal technology can be divided into two tags: necessary and nuisance.

Necessary technologies, the smaller of the two categories, are tools a modern law firm needs in order to function. Photocopiers, email and the telephone are just three examples.

Alternatively, nuisance focused technologies, where the vast majority of legal technology falls under, provide solutions that are faster, better and cheaper than existing methods and processes. These solutions alleviate real nuisances, but are not required to practise law. For example, AI powered due diligence software “reads” contracts and parses out key information. However, teams of junior associates can perform the very same task, albeit at a slower rate and higher price. Nuisance alleviating technologies are value-added solutions that law firms should strongly consider implementing but are reticent to adopt.

The Legal Technology Sales Triangle

For law firms, the consideration to adopt nuisance alleviating technologies is based on three factors: the simplicity of the technology, the product or service’s ease of use, and how quickly the financial returns are realized. These considerations, taken together, form what we at MinuteBox call the “Legal Technology Sales Triangle.” The degree to which each node is considered and satisfied may help determine whether a law firm will adopt a new nuisance alleviating technology.

Simple

Make sure your nuisance alleviating technology is simple in the eyes of lawyers. While outsiders see an industry inching towards modernization, lawyers feel that they’re on a bullet train moving at top speed. Understanding lawyers’ perspectives is essential when presenting new technologies or innovations to law firms.  Too much change too quickly is risky, and lawyers, as practitioners of risk aversion, will more often than not opt to remain on familiar turf.

So when pitching nuisance alleviating technologies to lawyers ask yourself the following questions:

1. Is my presentation too technical?
2. Will lawyers understand what I am trying to do?
3. Is this a tiny step or radical step in terms of how lawyers and law firms work?

Easy-To-Use

Many lawyers have been practicing the same way for decades and are prone to reverting back to tried and true processes whenever new technologies are introduced. Familiarity with tools and techniques creates a pervasive stickiness. Even though some steps in a legal process may be redundant, lawyers still follow each step. Their individual technique works for them.

Therefore, as a starting point, any new technology must be as easy or easier to use than whatever techniques or solutions the lawyers are currently using. That means if the current process takes five steps, any new solutions must be five steps or fewer. It doesn’t matter how complex the new step; a mouse click, an extra button press, even excessive load times all repel lawyers back to their preferred techniques.

New nuisance alleviating solutions must also be out-of-the box ready. Law firms are busy and are looking for end-to-end solutions that don’t require a lot of onboarding on their part.

The one exception to the easy-to-use requirement is if each additional step yields exponential returns. For every additional button press, mouse click or lag time, the financial return must be high.

Instant Return

The sooner a firm can see financial returns from the adoption of a technology the faster that firm will adopt it. For the vast majority of law firms, strategic decisions are made by the senior leadership, often composed of very senior partners nearing retirement. There is thus a lack of incentive for some decision makers to adopt high cost technologies which only yield returns in the distant future.

While some new technologies can positively impact a firm’s financial position in the long term, the immediate value in the eyes of the decision makers is limited. Instead, senior decision makers will be more inclined to invest in technologies that may be less impactful but have immediate financial returns.

The Legal Technology Sales Triangle is by no means a comprehensive tool when it comes to selling nuisance alleviating technologies to law firms. Yet it adds a sense of perspective for how most firms operate and the considerations they weigh when deciding to adopt impactful technologies.